How to Select a Bond Broker
Most likely, if you want to invest your money in bonds or other types of investment securities such as stocks and IRAs, you will do this through a broker. Before selecting a bond broker, there are several factors to consider, including their philosophy and personality and your comfort level with them.
- Difficulty:
- Moderately Easy
Instructions
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Choose a Securities Brokerage Firm or Broker
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1
Decide how much money you have to invest. Some brokerages have minimum amounts to open or maintain their accounts.
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2
Assess fees. Cheaper is not always better. Prices often reflect the level of service you receive. If you are paying a lot, you should expect excellent service. If you are paying low fees, you should be the type of investor who does most of your own research and does not need to reach people on the telephone to answer questions. In addition to trade commissions, there could also be account maintenance fees, wire transfer fees, fees to open or close an account, inactivity fees or fees to transfer money into or out of an account.
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3
Select a full-service or discount brokerage. Discount brokerages, including those online, generally execute transactions for you. Full-service brokerage firms will cost more, but usually provide you with more customer service, individual advice, research and information in addition to carrying out your transactions.
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4
Check the background of the bond broker and the firm before you select. Avoid those who have a record of disciplinary action or are unlicensed. The Financial Industry Regulatory Authority offers such a service for free (see Resources below).
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5
Request a copy of the firm's commission schedule to understand how your broker gets paid. This could be based on how much money you invest or how many transactions you carry out. Also, some brokerages pay their brokers extra to sell that firm's own products.
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6
Ask for a copy of the account agreement and other documentation before you open an account. Then take it home and read it thoroughly. If you feel pressured to open an account during your initial visit, the broker will likely be just as aggressive when selling a bond to you or pushing you toward other investment decisions.
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1
Tips & Warnings
Test broker customer service before hiring a person or company. If you're a phone person, be sure it is easy to reach somebody by phone. If you plan to do most of your transactions online, make sure the brokerage's website is easy to navigate.
